DP12805 News and Archival Information in Games

Author(s):	Ran Spiegler
Publication Date:	March 2018
Keyword(s):	archival information, causal models, high-order beliefs, maximum entropy, non-rational expectations
JEL(s):	C70, D01
Programme Areas:	Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=12805

I enrich the typology of players in the standard model of games with incomplete information, by allowing them to have incomplete "archival information" - namely, piecemeal knowledge of correlations among relevant variables. A player is characterized by the conventional Harsanyi type (a.k.a "news-information") as well as the novel "archive-information", formalized as a collection of subsets of variables. The player can only learn the marginal distributions over these subsets of variables. The player extrapolates a well-specified probabilistic belief according to the maximum-entropy criterion. This formalism expands our ability to capture strategic situations with "boundedly rational expectations." I demonstrate the expressive power and use of this formalism with some examples.